While it would have been excellent symmetry to have shown that Jack had been abused as Ennis had, it would have interrupted the flow to have put that scene there, and it would have been desperately difficult to get from Ennis's recollection into Jack's thoughts. It would also have been very hard to have conveyed the meaning of the scene without showing a) a man's penis b) a boy's penis c) pissing, all of which would have bumped the film into R territory.
One way to get around that would be to have shown Jack telling the story to Ennis earlier, possibly with a flashback of Jack's then, which wouldn't have had to be so explicit since Jack could explain it (just as we heard Ennis explaining his flashback), and then have Ennis pass the bathroom (upstairs?) and HEAR some of that scene in flashback, though it would still be a problem how Ennis concluded from that that it was the tyre iron.
I agree that the screen writers could have chosen an earlier time in the movie with Jack was with Ennis and Jack told him about his father pissing on him. In an earlier scene, it could have been more detailed; but, when Ennis had that memory in the book, they could have a quick short flashback by Ennis remembering that just before he went up the stairs to Jack's room.
In the book (that's what I call the original published in book form short story), Annie Proulx described the 2-story house as having only 4 rooms, two down and two up. And since Jack was almost always "late" getting to the bathroom, more than likely the bathroom was downstairs as an add-on to the house. I have seen houses made like that. (My family did live in a house like that in the country but, it did not have an indoor bathroom, only an outdoor toilet.)
Another reason for the bathroom to be on the ground level was that it would have been cheaper to use less plumbing and since Jack's bedroom was tiny, more than likely the upstairs bedrooms were more likely attic bedrooms. Here in Oklahoma, USA, we have referred to houses with attic bedrooms above the ground floor as 2-story houses, even the one we lived in.
In the USA, the movie was given an R rating. Adding the pissing scene, with Jack talking about it would not changed the rating which it was given. They could have done that without actually showing Mr. Twist's uncircumcised penis, too. Jack could have just done a voice-over of the telling of it. The movied did not actually show Ennis and Jack having sexual intercourse; because, you really don't see a penis in the movie (other from a distance in then skinny-dippin' scene).
Many things from the original story were ignored by the screenplay writers which I think were important to the story. Two of them were the fact that Ennis drove his own truck to Aguirre's office in Signal (the place where K. E., his brother, lived) and the fact that the trailer where Ennis tacked the postcard and hung the shirts on the trailer wall was at the Signal, Wyoming Stoutamire ranch. The real story begins with Ennis getting ready to move off the ranch because it is being sold and the the narrator flashes back to Ennis reporting to work at Aguirre's office in Signal, to bring the reader up to date as to why Ennis had the dream and why he had the shirts.
